Former Washington state auditor sentenced to year in prison

OLYMPIA, Wash. (AP) — Former Washington state Auditor Troy Kelley has been sentenced to a year in prison following his conviction in December on fraud and other charges related to when he ran a real-estate escrow services business during the height of last decade’s housing boom.

Friday’s sentencing comes after Kelley’s second trial, when he was found guilty of eight felonies, including possession of stolen property, making false declarations under oath, and tax fraud. The sentence of 12 months and one day, followed by a year of supervised release was issued after a nearly two-hour sentencing hearing.

His first federal fraud trial last year ended with an acquittal on one count and a deadlocked jury on more than a dozen others. The charges stemmed from Kelley’s operation of a business that tracked escrow paperwork for title companies.

Prosecutors had sought more than seven years, while Kelley’s attorneys had asked the court to sentence him to five years of probation and six months under house arrest, along with $1.4 million in damages, which the judge denied. A separate restitution hearing has been scheduled for Sept. 21.

Kelley ran a business called Post Closing Department, which tracked escrow paperwork for title companies.

Prosecutors said that to obtain business from the title companies — and access vast sums of money from homeowners — Kelley promised that Post Closing Department would collect $100 to $150 for each transaction it tracked; keep $15 or $20 for itself; use some of the money to pay county recording and other fees if necessary; and refund the customer any remaining money.

In tens of thousands of cases, the additional fees were not needed, but Kelley retained the money anyway, prosecutors said. He refunded the balance only in a few instances when title companies began asking uncomfortable questions or when homeowners were savvy enough to demand it, prosecutors said. Kelley insists he was entitled to keep the money.

One of the companies Kelley worked with, Old Republic Title, sued him for not paying the refunds. Kelley settled the case for $1.1 million after making what prosecutors contend were false statements about his practices under oath.

The first Washington state official indicted in 35 years, Kelley took a seven-month leave of absence after he was charged. He returned to office after the trial, defying bipartisan calls for his resignation, but he decided not to seek re-election as auditor. The position, which is tasked with rooting out waste and fraud in state government, is now held by Democrat Pat McCarthy.